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    Commercial Insurance Blog

    What is a General Liability Insurance Audit?

    Posted by Geoffrey Gordon on Mon, Mar 18, 2013 @ 09:00 AM

    An insurance audit for General Liability is performed by the insurance company at the end of each policy term to verify annual revenue was adequately reported and the policy reflects accurate rating information.  

    what is an insurance audit?Honest is Best

    Underestimating revenue for an insurance program carries some risks. Say a business does $1,000,000 in sales and the general liability cost is based on that rating metric. To save money the business owner tells the insurance company their sales are only $500,000. If the insurance costs $5,000 under these assumptions you'd think the business saved $5,000. When the audit uncovers the $1,000,000 in sales however, last year's policy cost is adjusted retroactively by $5,000, due immediately.  Then, in the interest of collecting a proper amount of premium for the new year, the insurance company updates the sales forecast for the current term to $1,000,000, resulting in an additional $5,000 charge. This is the double whammy scenario!

    insurance audits for general liability or workers compensation

     

    Money Back and Responding in Time

    When sales come in below expectations most policies provide for return premiums. Some surplus and excess policies do not make such allowances however, so it is important to discuss projected revenues with your agent to avoid overpaying.

    The audit exercise is typically a simple process of providing evidence of sales (income statement or tax reports).  Failure to comply in the time given though will result in an "assumed audit" with the carrier applying a revenue increase of 50% or more.  This gives the carrier leverage until you finally sit down and provide them actual figures.

    Please call a Gordon Atlantic Insurance professional to discuss the best possible insurance program for you by calling toll free at 1-800-649-3252.  Prefer to type versus talk?  Click below for a return email or phone call.

     

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    Geoff Gordon

    Tags: insurance audit, audit, general liability insurance

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